U.S. Steel Group v. United States

Slip Op. 01-139

United States Court of International Trade

U.S. STEEL GROUP, A UNIT OF USX
CORPORATION AND BETHLEHEM
STEEL CORPORATION,

Plaintiffs,
Before: Pogue, Judge
v.
Court No. 00-03-00136
UNITED STATES,
Public Version
Defendant,

and

NIPPON STEEL CORPORATION,

Defendant-Intervenor.

[Plaintiffs’ motion for judgment on the agency record denied; final
results of agency administrative review sustained.]

Decided: November 30, 2001

Skadden, Arps, Slate, Meagher & Flom LLP (Robert E. Lighthizer,
John J. Mangan, Jeffrey D. Gerrish), for Plaintiffs.

Robert D. McCallum, Jr., Assistant Attorney General; David M.
Cohen, Director, Michele D. Lynch, Janene Marasciullo, Attorneys,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice; Stephen M. De Luca, Attorney, Office of the Chief Counsel
for Import Administration, U.S. Department of Commerce, Of Counsel,
for Defendant.

Gibson, Dunn & Crutcher LLP (Daniel J. Plaine, Andrea F. Dynes,
Merritt R. Blakeslee, Lisa A. Murray), for Defendant-Intervenor.
Court No. 00-03-00136 Page 2

OPINION

Pogue, Judge: This matter is before the Court on the motion of

U.S. Steel Group, a unit of USX Corporation, and Bethlehem Steel

Corporation (“Plaintiffs”), for judgment on the agency record

pursuant to USCIT Rule 56.2. Plaintiffs challenge the Department

of Commerce’s (“Commerce”) calculation of the dumping margin for

Nippon Steel Corporation (“NSC”) in Certain Corrosion-Resistant

Carbon Steel Flat Products from Japan: Final Results of Antidumping

Duty Administrative Review, 65 Fed. Reg. 8,935 (Dep’t Commerce Feb.

23, 2000) (“Final Results”). The Court denies Plaintiffs’ motion

and sustains the final results of the administrative review.

Background

On February 23, 2000, Commerce published its Final Results in

the fifth administrative review of the antidumping duty order on

corrosion-resistant carbon steel flat products from Japan. The

period of review was August 1, 1997 through July 31, 1998. The

review covered exports of two Japanese manufacturers, including

NSC.1

NSC sells corrosion-resistant carbon steel flat products

(“CRS”) to both the Japanese and U.S. markets. In calculating the

dumping margin for NSC, Commerce compared sales to the same

1
The review also covered Kawasaki Steel Corporation, which
is not a party to the current action.
Court No. 00-03-00136 Page 3

customer in both the home and U.S. markets. The customer, Customer

A, is a trading corporation affiliated with Corporation B.2 See

Petitioner’s Factual Information Re: NSC, Dun & Bradstreet Company

Report, Customer A, Pro. Doc. No. 23 at 1, 5, 11 (Jan. 19, 1999).3

Corporation B uses a substantial quantity of NSC’s products,4 and

makes most of its purchases of NSC’s CRS through Customer A. See

Petitioners’ Comments on NSC Response to Sections A-D of the

Antidumping Questionnaire, Pro. Doc. No. 22 at 28 (Jan. 15, 1999)

(“Petitioner’s Comments on NSC Response to Sections A-D”); NSC

Third Supplemental Questionnaire Response, Pro. Doc. No. 40 at 2

(May 24, 1999). NSC enters into price negotiations with both

Customer A and Corporation B to set price ranges but not final

prices. NSC also offers certain pricing arrangements to trading

companies and end users,5 including Corporation B. See NSC Section

A Response at A-20 - A-22. In the U.S., Customer A is the importer

2
Throughout this opinion, [ ] is
referred to as Customer A and [ ] is
referred to as Corporation B.
3
Cites to the administrative record specify whether
reference is made to a public document (“Pub. Doc.”) or to a
proprietary document (“Pro. Doc.”).
4
Corporation B is the [ ] of
NSC’s products. See Petitioners’ Comments on NSC Response to
Sections A-D, Pro. Doc. No. 22 at 28; see also NSC Sales
Verification Memorandum, Pro. Doc. No. 59, Ex. 37 at 70, 72 (July
22, 1999) (“Verification Memo.”).
5
NSC [ ] trading companies and [
], including Corporation B. See NSC Response
to Section A of the Antidumping Questionnaire, Pro. Doc. No. 1 at
A-20 - A-22 (Oct. 22, 1998) (“NSC Section A Response”).
Court No. 00-03-00136 Page 4

of record, see NSC Response to Sections B-D of the Antidumping

Questionnaire, Pro. Doc. No. 16, at C-46 (Dec. 8, 1998), and as

such is responsible for payment of antidumping duties.

Plaintiffs assert (1) that the use of sales to the same

customer in both the home and U.S. markets to determine normal

value results in an unfair comparison, and (2) that the sales in

question were outside the ordinary course of trade and should have

been excluded from the normal value calculations.

Standard of Review

The Court will uphold an antidumping review determination

unless it is “unsupported by substantial evidence on the record, or

otherwise not in accordance with law.” 19 U.S.C. §

1516a(b)(1)(B)(i).

“Substantial evidence” is “such relevant evidence as a

reasonable mind might accept as adequate to support a conclusion.”

Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951) (internal

citations and quotations omitted); Micron Tech., Inc. v. United

States, 117 F.3d 1386, 1393 (Fed. Cir. 1997). The possibility of

drawing two inconsistent conclusions from the evidence does not

mean that an agency’s finding is not supported by substantial

evidence. Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966).

A decision will be reviewed on the grounds invoked by the agency,

see SEC v. Chenery Corp., 332 U.S. 194, 196 (1947), and the Court
Court No. 00-03-00136 Page 5

may “uphold a decision of less than ideal clarity if the agency’s

path may reasonably be discerned.” Bowman Transp., Inc. v.

Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974).

Discussion

I. Fair Comparison

In calculating a dumping margin, Commerce compares the price

of a good in the U.S. to its price in the exporting country, known

as its normal value.6 19 U.S.C. § 1677b(a) requires that this

comparison be “fair,” stating that “a fair comparison shall be made

between the export price or constructed export price and normal

value.” The statute further states that “[i]n order to achieve a

fair comparison . . . normal value shall be determined as follows

. . . .” Id. The paragraphs that follow set out the steps

Commerce must take in determining normal value, and include

adjustments and exclusions of sales intended to ensure the accuracy

of the normal value determination and the resultant dumping margin

6
Normal value is

the price at which the foreign like product is
first sold (or, in the absence of a sale,
offered for sale) for consumption in the
exporting country, in the usual commercial
quantities and in the ordinary course of trade
and, to the extent practicable, at the same
level of trade as the export price or
constructed export price.

19 U.S.C. § 1677b(a)(1)(B).
Court No. 00-03-00136 Page 6

calculation.

In the instant case, Commerce included home market sales from

NSC to Customer A in its normal value determination, and also used

sales to Customer A in determining the U.S. price. The dumping

margin is therefore calculated using sales to the same customer in

both markets. Plaintiffs contend that in using sales to the same

customer in both markets, Commerce failed to make the “fair

comparison” required by 19 U.S.C. § 1677b(a). Plaintiffs argue

that both the seller and the customer had financial interests in

avoiding antidumping duties and incentives to mask any dumping that

was taking place, which rendered reported prices unreliable, see

Pl.’s Mem. Supp. Mot. J. Agency R. (“Pl.’s Mem.”) at 13, and

created the potential for price manipulation. Id. at 21.

Plaintiffs assert that these risks caused the price comparison to

be unfair, and required the exclusion of the transactions even

without actual evidence of inaccurate price reporting or price

manipulation. See id. at 21-22.

Plaintiffs refer to three cases to support their claim that

Commerce should have excluded from the price comparison the sales

to Customer A in both markets. Koenig & Bauer-Albert AG v. United

States, 22 CIT __, 15 F. Supp. 2d 834 (1998), involved the

alteration of contract prices after the filing of an antidumping

petition. The court upheld Commerce’s decision to base the price

comparison on the original, rather than the adjusted, contract
Court No. 00-03-00136 Page 7

price, because the adjusted, post-petition prices were considered

potentially suspect and open to manipulation and Commerce had been

unable to verify them. See Koenig, 22 CIT at __, 15 F. Supp. 2d at

840.

Koyo Seiko Co. v. United States, 20 CIT 920, 936 F. Supp. 1040

(1996), aff’d in part, vacated in part by 121 F.3d 726 (Fed. Cir.

1997), involved Commerce’s discretionary decision to employ a set-

splitting methodology to calculate the foreign market value of a

product. The court noted that “[i]n the absence of set-splitting,

a respondent may compel the use of constructed value by selling

sets in one market and single [products] in another.” Id. at 930,

936 F. Supp. at 1048. Concerned that such a practice could impede

the calculation of the most accurate foreign market value possible

and help to circumvent the antidumping laws, the court deferred to

Commerce’s reasonable choice of methods for achieving the most

accurate calculation. Id.

Finally, in Zenith Elecs. Corp. v. United States, 15 CIT 394,

770 F. Supp. 648 (1991), rev’d on other grounds, 77 F.3d 426 (Fed.

Cir. 1996) this Court remanded for further investigation the issue

of whether certain sales were fictitious because “there was

sufficient material in the record to raise a reasonable suspicion

that some or all of the Canadian sales were contrived for the

purpose of serving as the basis for a favorable FMV calculation.”

Zenith, 15 CIT at 406, 770 F. Supp. at 659 (emphasis supplied).

Under Zenith, Commerce has a duty to investigate further where
Court No. 00-03-00136 Page 8

there is sufficient evidence on the record to raise a reasonable

suspicion that the sales in question are not representative of the

market. See id. at 406-07, 770 F. Supp. at 659.

These three cases are distinguished by the fact that in each

of them, Commerce had reason to believe the sales or prices in

question were unreliable in some manner. In the instant case,

however, Commerce did not find evidence that would raise a

reasonable suspicion that the reported prices were unreliable or

subject to manipulation, or that the sales in question were not

representative of the market and should have been excluded. In

fact, Commerce was able to verify NSC’s pricing practices and

relationships with Customer A and Corporation B. See Verification

Memo. Plaintiffs apparently propose that Commerce has a duty to

exclude sales from the margin calculation even in the absence of

evidence suggesting their unreliability, but this proposition is

unsupported in the statute, regulations, and case law.7

7
Plaintiffs do not assert that Commerce failed to accurately
follow the procedures set out in the statute; rather, Plaintiffs
argue that the term “fair comparison” creates a separate, general
requirement of fairness under § 1677b(a), such that the totality
of the circumstances surrounding the normal value determination
must be inherently “fair” in order to meet the statute’s
requirements. See Pl.’s Mem. at 13-16. The Court has not found,
nor have Plaintiffs presented, any authority supporting a
construction of “fair comparison” as a separate or freestanding
requirement. The Court, however, concludes on the basis of the
record in this matter that Commerce did in fact achieve a fair
comparison in compliance with the statute, and does not reach the
question of whether the statute includes a separate requirement
of fairness.
Court No. 00-03-00136 Page 9

In the administrative review prior to the matter at issue

here, Commerce found that it is not unusual for there to be sales

to both markets through the same customer. Final Results at 8,940;

see also Certain Corrosion-Resistant Carbon Steel Flat Products

From Japan: Final Results of Antidumping Duty Administrative

Review, 64 Fed. Reg. 12,951, 12,954 (Dep’t Commerce Mar. 16, 1999)

(“Fourth Review”) (“That the customer in question purchased the

identical product in both markets is not, in itself, unusual, nor

suggestive of an intentional evasion or circumvention of the

antidumping duty law.”). According to Commerce, the existence of

sales to the same customer in both markets involved in the

comparison “is not, on its own, sufficient grounds to reject

comparisons of such sales in calculating the dumping margin.” Mem.

U.S. Opp’n to Mot. J. Agency R. (“Def.’s Mem.”) at 13-14 (quoting

Pl.’s Mem. at 17); see also Final Results at 8,937-38 (noting that

the fact that “the sales to both markets [were] made to the same

customer” is not “compelling”).

In the course of its investigation in the fifth administrative

review, Commerce conducted a verification of NSC’s responses to

Commerce’s questionnaires, including responses concerning sales

processes, pricing arrangements, and NSC’s relationships with

Customer A and Corporation B. See Verification Memo. Commerce

verified that “NSC’s sales negotiation process with [Customer A] in

the home market is the same as that with its other unaffiliated

customers.” Def.’s Mem. at 5 (citing Verification Memo. at 2-3);
Court No. 00-03-00136 Page 10

see also Verification Memo. at 10-11 (describing the sales process

with Customer A and Corporation B); NSC Section A Response at A-20

- A-22 (describing the sales process with unaffiliated companies in

general). Commerce also verified that “[c]hanges in NSC’s prices

since 1991 were applied to all customers” and that “NSC’s prices to

[Corporation B] [always varied from] those for other . . .

customers.” Def.’s Mem. at 6 (citing Verification Memo. at 11, Ex.

37). As noted by the Defendant, if price manipulation were taking

place, Commerce would have expected to find certain price

adjustments for products destined for Corporation B since the

implementation of the antidumping order. Id. at 14-15. However,

Commerce’s findings regarding NSC’s pricing and sales practices did

not suggest any price adjustments which might indicate price

manipulation to affect dumping margins.8 See id. at 6, 15-16;

Verification Memo. at 10-11, Ex. 37 at 69; NSC Supplementary

Response to Sections A-D of the Antidumping Questionnaire, Pro.

Doc. No. 27, Pub. Doc. No. 86 at 11-12 (Feb. 18, 1999).

8
Exhibit 37 indicates that [

]; for other end users [
]. See Verification Memo.,
Ex. 37 at 69; Def.’s Mem. at 6, 14-15. [
] between 1991 and the period of review [ ] for
Corporation B, [ ] for other end users. Verification
Memo., Ex. 37 at 69; Def.’s Mem. at 15. Additionally, Commerce
verified that [
]. See
Verification Memo. at 10; NSC Supplementary Response to Sections
A-D of the Antidumping Questionnaire, Pro. Doc. 27, Pub. Doc. 86
at 11-12 (Feb. 18, 1999).
Court No. 00-03-00136 Page 11

Finally, Defendant notes that it would be permissible for NSC,

Customer A, and Corporation B to agree to reduce home market prices

for goods destined to Corporation B. See Def.’s Mem. at 19-20.

The purpose of the antidumping statute is to prevent dumping, which

entails reducing or eliminating discrepancies in pricing between

the U.S. and foreign markets. See Lasko Metal Prods., Inc. v.

United States, 43 F.3d 1442, 1446 (Fed. Cir. 1994)(stating that

“[t]he purpose of the [Tariff Act of 1930] is to prevent dumping”);

Koyo Seiko Co. v. United States, 20 F.3d 1156, 1159 (Fed. Cir.

1994) (stating that the purpose of the antidumping statute is “to

protect domestic manufacturing against foreign manufacturers who

sell at less than fair market value”); see also Rhone Poulenc, Inc.

v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990)(indicating

that the “basic purpose of the statute” is “determining current

margins as accurately as possible”). This may be achieved by

either raising U.S. prices or by lowering the home market prices.

See Fourth Review at 12,954 (stating that “it is permissible for a

respondent to reduce or eliminate dumping either by raising its

U.S. prices or by lowering its home market prices of merchandise

subject to the order”) (citing Notice of Final Results of

Antidumping Duty Administrative Review: Furfuryl Alcohol from the

Republic of South Africa, 62 Fed. Reg. 61,084, 61,085 (Dep’t

Commerce Nov. 14, 1997); Tapered Roller Bearings and Parts Thereof,

Finished and Unfinished, from Japan, and Tapered Roller Bearings,

Four Inches or Less in Outside Diameter, and Components Thereof,
Court No. 00-03-00136 Page 12

From Japan; Final Results of Antidumping Duty Administrative

Reviews and Termination in Part, 62 Fed. Reg. 11,825, 11,831 (Dep’t

Commerce Mar. 13, 1997) (stating that a firm has discretion to

choose a method for eliminating price discrimination, and that “a

respondent may act to eliminate the price differential by (1)

increasing its U.S. prices, (2) lowering its home market prices, or

(3) undertaking a combination of the two”).

The record shows no evidence of inaccurate reporting or price

manipulation by NSC, Customer A, and Corporation B. Based on this

record, Commerce concluded that there was insufficient indication

of the potential for price manipulation to warrant exclusion of the

sales. Cf. Koenig, 22 CIT at __, 15 F. Supp. 2d at 840-41.

Because Commerce’s conclusion is based on reasonable inferences

drawn from evidence in the record, it is supported by substantial

evidence.

In addition, nothing in the statute requires Commerce to

investigate further. The statute requires Commerce to verify

information but leaves the scope of verification and the procedures

for conducting it to Commerce’s discretion. See 19 U.S.C. §

1677m(i); see also 19 C.F.R. § 351.307. This Court has held that

when evidence reaches the level of reasonable suspicion, Commerce

must investigate further. See Zenith, 15 CIT at 406-07, 770 F.

Supp. at 659. But the mere possibility that prices could be

manipulated is insufficient grounds to require the agency to
Court No. 00-03-00136 Page 13

disregard sales in the absence of evidence creating a basis for

reasonable suspicion of actual manipulation.9 Accordingly, the

agency’s decision is in accordance with law.

II. Ordinary Course of Trade

As noted above, 19 U.S.C. § 1677b(a) requires that in

calculating a dumping margin, a “fair comparison shall be made

between the export price or constructed export price and normal

value.” One criterion for the normal value determination is that

9
Commerce disregards sales due to the possibility of price
manipulation when dealing with transactions among affiliated
entities. See SSAB Svenskt Stal AB v. United States, 21 CIT
1007, 1009, 976 F. Supp. 1027, 1030 (1997) (stating that
“Commerce’s normal practice is to disregard the manufacturer’s
prices to its related distributors or dealers in calculating
foreign market value unless the manufacturer demonstrates to
Commerce’s satisfaction that the prices are at arm’s length”);
see also Koenig & Bauer-Albert AG v. United States, 24 CIT __,
__, 90 F. Supp. 2d 1284, 1287 & n.5 (2000), aff’d in part,
vacated in part by Koenig & Bauer-Albert AG v. United States, 259
F.3d 1341 (Fed. Cir. 2001) (noting that “[i]n determining whether
to collapse related or affiliated companies, the Department must
decide whether the affiliated companies are sufficiently
intertwined as to permit the possibility of price
manipulation”)(quoting Notice of Final Determination of Sales at
Less Than Fair Value: Certain Pasta from Italy, 61 Fed. Reg.
30,326, 30,351 (Dep’t Commerce June 14, 1996)); FAG (U.K.) Ltd.
v. United States, 22 CIT __, __, 24 F. Supp. 2d 297, 302 (1998)
(stating that “Commerce collapses parties when it determines that
the companies are so interrelated to each other that there is a
possibility of price manipulation”). The Court has found no
authority suggesting that Commerce disregard sales in other
circumstances due to the mere possibility of price manipulation,
without some further evidence suggesting that manipulation is a
genuine risk. Cf. Fed.-Mogul Corp. v. United States, 20 CIT 234,
263-64, 918 F. Supp. 386, 411-12 (1996) (upholding Commerce’s
decision to use transfer prices where Commerce verified random
sample prices and where there was no evidence of price
manipulation).
Court No. 00-03-00136 Page 14

the sale is “in the ordinary course of trade.”10 The purpose of the

ordinary course of trade provision is to avoid a calculation of

normal value and dumping margins that is based on sales that are

not representative of the market in question. Cemex, S.A. v.

United States, 133 F.3d 897, 900 (Fed. Cir. 1998) (quoting

Monsanto Co. v. United States, 12 CIT 937, 940, 698 F. Supp. 275,

278 (1988)).

Ordinary course of trade is defined in 19 U.S.C. § 1677(15) as

“the conditions and practices which, for a reasonable time prior to

the exportation of the subject merchandise, have been normal in the

trade under consideration with respect to merchandise of the same

class or kind.” The statute explicitly labels two types of

transactions as outside the ordinary course of trade.11 In cases

10
See the definition of normal value as stated in 19 U.S.C.
§ 1677b(a)(1)(B) in note 6, supra.

11
19 U.S.C. § 1677(15) states that

The administering authority shall consider the
following sales and transactions, among
others, to be outside the ordinary course of
trade:
(A) Sales disregarded under section
1677b(b)(1) of this title.

(B) Transactions disregarded under
section 1677b(f)(2) of this title.

Section 1677b(b)(1) addresses prices that are less than the
cost of production, while § 1677b(f)(2) addresses transactions
between affiliated parties. The phrase “among others” indicates
that these two exclusions are not the only permissible
exclusions. This Court has found that the statute and
legislative history are “ambiguous as to what constitutes a sale
Court No. 00-03-00136 Page 15

not falling within the statutory exclusions, Commerce has

discretion to determine on a case-by-case basis which transactions

fall outside the ordinary course of trade. See Torrington Co. v.

United States, 25 CIT __, __, 146 F. Supp. 2d 845, 861-62 (2001);

Bergerac, N.C. v. United States, 24 CIT __, __, 102 F. Supp. 2d

497, 507 (2000). Commerce’s procedures for making an ordinary

course of trade determination are found in 19 C.F.R. § 351.102

(2000). The regulations require examination of the totality of the

circumstances in order to avoid basing home market value on sales

or transactions that are “extraordinary for the market in

question.” 19 C.F.R. § 351.102(b). The regulations state that

[t]he Secretary [of Commerce] may consider
sales or transactions to be outside the
ordinary course of trade if the Secretary
determines, based on an evaluation of all of
the circumstances particular to the sales in
question, that such sales or transactions have
characteristics that are extraordinary for the
market in question.

Id. The ordinary course determination is highly fact-specific, and

Commerce looks at all the circumstances surrounding the

transactions in question. It does not focus on a single

circumstance in isolation. See NSK Ltd. v. United States, slip op.

01-69, at 37 (CIT June 6, 2001); Bergerac, 24 CIT at __, 102 F.

Supp. 2d at 505, 507, 509; Murata Mfg. Co., Ltd. v. United States,

17 CIT 259, 264, 820 F. Supp. 603, 607 (1993). Section 351.102(b)

outside the ordinary course of trade.” NSK Ltd. v. United
States, slip op. 01-69, at 37 (CIT June 6, 2001).
Court No. 00-03-00136 Page 16

provides additional examples of transactions considered outside the

ordinary course of trade, including those involving

off-quality merchandise or merchandise
produced according to unusual product
specifications, merchandise sold at
aberrational prices or with abnormally high
profits, merchandise sold pursuant to unusual
terms of sale, or merchandise sold to an
affiliated party at a non-arm’s length price.

19 C.F.R. § 351.102(b).

Commerce determines what is ordinary for the market in

question by looking at market conditions, practices, and other

sales. It then compares the transactions in question to see if

they exhibit characteristics that are extraordinary for the market.

See, e.g., NTN Bearing Corp. of Am. v. United States, 25 CIT __,

__, 155 F. Supp. 2d 715, 733 (2001); Mantex, Inc. v. United States,

17 CIT 1385, 1402-03, 841 F. Supp. 1290, 1305-06 (1993). Sales

with characteristics that are extraordinary for the market may be

excluded. 19 C.F.R. § 351.102(b); Torrington, 25 CIT at __, 146 F.

Supp. 2d at 860-62.

The party seeking to exclude sales from the price comparison

has the burden of demonstrating that the sales in question are

extraordinary for the market and outside the ordinary course of

trade. Bergerac, 24 CIT at __, 102 F. Supp. 2d at 509, NTN Bearing

Corp. of Am. v. United States, 19 CIT 1165, 1172, 903 F. Supp. 62,

68-69 (1995); Murata, 17 CIT at 264, 820 F. Supp. at 606. Absent

adequate evidence of extraordinary characteristics, Commerce

includes the sales in its margin calculation. See NTN Bearing
Court No. 00-03-00136 Page 17

Corp., 25 CIT at __, 155 F. Supp. 2d at 733; Torrington, 25 CIT at

__, 146 F. Supp. 2d at 862-63; Bergerac, 24 CIT at __, 102 F. Supp.

2d at 509.

The transactions in question here are within neither the

specifically excluded categories in 19 U.S.C. § 1677(15) nor the

examples in 19 C.F.R. § 351.102(b).12 As the instant case is not

explicitly addressed in the statute and regulations, Commerce was

required to examine the totality of the circumstances to determine

whether the sales are within the ordinary course of trade. The

parties to this action acknowledge Commerce’s discretion to

determine whether a sale or transaction is in the ordinary course

of trade.13 See Pl.’s Mem. at 25; Def.’s Mem. at 24; Def. Int.’s

12
There is no indication that the sales were below cost, see
19 U.S.C. § 1677b(b)(1), or that the sales were between
affiliates at non-market prices. See 19 U.S.C. § 1677b(f)(2).
There is also no indication that the sales involve abnormally
high profits, unusual product specifications, or unusual terms of
sale. See 19 C.F.R. § 351.102(b).
13
The Statement of Administrative Action, accompanying H.R.
Rep. No. 103-826 (1994), reprinted in 1994 U.S.C.C.A.N. 4040
(“SAA”), accompanying the U.S. implementing legislation for the
Uruguay Round Antidumping Agreement is “an authoritative
expression by the United States concerning the interpretation and
application of the Uruguay Round Agreements and this Act in any
judicial proceeding in which a question arises concerning such
interpretation or application.” 19 U.S.C. § 3512(d).
The SAA states that “Commerce may consider other types of
sales or transactions to be outside the ordinary course of trade
when such sales or transactions have characteristics that are not
ordinary as compared to sales or transactions generally made in
the same market.” SAA at 834. The SAA further states that
although section 771(15) (19 U.S.C. § 1677(15)) does not
establish an exhaustive list of excluded transactions, “the
Administration intends that Commerce will interpret section
771(15) in a manner which will avoid basing normal value on sales
Court No. 00-03-00136 Page 18

Mem. Opp’n Pl.’s Mem. Supp. Mot. J. Agency R. at 32.

In its Final Results here, Commerce notes that the greater the

volume of sales sought to be excluded as outside the ordinary

course of trade, the more evidence is required to support

exclusion. Final Results at 8,940.14 Plaintiffs assert that the

sales in question are outside the ordinary course of trade because

(1) there is a “‘discernable pattern of lower home market sales

prices’ to [Corporation B] when compared to home market sales of

the same merchandise to other customers,” Pl.’s Mem. at 28

(referring to the Fourth Review at 12,955), and (2) there existed

financial incentives and opportunities for NSC, Corporation B, and

Customer A to manipulate prices. See Pl.’s Mem. at 30, 32.

Commerce concluded that the sales were in the ordinary course

of trade. First, Commerce noted that the volume of home market

sales in question is very large. “[T]he existence of a small

quantity of sales of a certain type is one factor Commerce

considers when assessing whether sales had been made outside the

ordinary course of trade.” Final Results at 8,940 (citing Mantex,

which are extraordinary for the market in question, particularly
when the use of such sales would lead to irrational or
unrepresentative results.” Id. Thus, the SAA indicates that
Congress granted Commerce interpretive authority to determine
whether transactions are in the ordinary course of trade.
14
When Commerce does exclude sales as outside the ordinary
course of trade, it must provide a complete explanation of its
reasons for excluding the sales. Bergerac, 24 CIT at __, 102 F.
Supp. 2d at 509; NTN Bearing Corp. of Am. v. United States, 19
CIT 1221, 1229, 905 F. Supp. 1083, 1091 (1995).
Court No. 00-03-00136 Page 19

17 CIT at 1405-06, 841 F. Supp. at 1307-08 (1993)). Whether sales

were outside the ordinary course depends on whether they are unlike

“sales of merchandise of the same class or kind generally made in

the home market.” Final Results at 8,940. The greater the volume

of sales in question,

the more difficult it becomes to separate the
sales in question from those ‘generally’ made
in the home market. Therefore, we believe
that as the percentage of sales in question
rises, so should the overall evidentiary
requirements supporting a finding of sales
outside the ordinary course of trade be all
the more rigorous.

Id. at 8,940.

Ultimately, Commerce “[did] not find the record evidence

determinative in either direction” with regard to relative pricing.

Id. As noted earlier, Commerce’s investigation found no evidence

of price manipulation. See supra p. 9-10. Further, Commerce noted

that “the mere presence of evidence, or even the actual existence,

of lower average prices to one unaffiliated customer” is not

necessarily sufficient evidence to consider a sale to be outside

the ordinary course of trade. Final Results at 8,940. Commerce

also stated that it must evaluate “all the circumstances particular

to the sales in question.” Murata, 17 CIT at 264, 820 F. Supp. at

607 (internal citations and quotations omitted). Thus, Commerce

noted the existence of non-price factors relevant to its

determination, including “the relative volume of sales to the

customer in both markets” and the fact that sales to the same
Court No. 00-03-00136 Page 20

customer in both markets were not unusual.15 Final Results at

8,940. Sales of NSC’s products destined for Corporation B

constitute a substantial percentage of total NSC sales, see

Verification Memo., Ex. 37 at 72, while sales destined for the U.S.

market constitute a smaller percentage of total NSC sales. See NSC

Quantity and Value Reconciliation, Pro. Doc. No. 49, QV Summary

Worksheet at 1-2 (June 8, 1999). Further, the high volume of home

market sales and the low volume of U.S. sales also suggest that

there is little commercial incentive for NSC to manipulate its home

market prices to reduce the dumping margin, which will affect only

a small percentage of its total sales. Final Results at 8,940; see

also Fourth Review at 12,955. NSC, Customer A, and Corporation B

have a long-standing commercial relationship, and Corporation B is

a significant home market end user of CRS and of NSC’s output. See

Verification Memo. at 11 (indicating that the relationship dates

from at least 1991) and at Ex. 37 at 70,72 (showing the proportion

15
Commerce stated

We also find that the non-price factors we
considered in support of our finding in the
fourth review (i.e., the relative volume of
sales to the customer in both markets
suggested there was little commercial
incentive for the respondent to engage in the
suppression of home market prices to eliminate
hypothetical margins; there was nothing
unusual about the fact that there were sales
made to both markets through one customer) are
equally applicable in this review.

Final Results at 8,940.
Court No. 00-03-00136 Page 21

of NSC’s products sold to Corporation B). These facts provide

evidence of legitimate commercial reasons leading NSC to enter into

certain pricing and sales arrangements16 with Customer A and

Corporation B.

Plaintiffs attempt to inflate the significance of the pricing

treatment provided to Corporation B by applying the arm’s length

test for price comparability, used to assess whether prices in

transactions between affiliates are at market rates. The test

requires the prices paid by affiliates to be 99.5% of the prices

paid by unaffiliated parties in order to be considered market rate.

Plaintiffs offer no authority supporting the use of the test to

evaluate transactions between unaffiliated parties, as are present

here. Rather, Plaintiffs suggest that the purpose of the test

supports extending its use to unaffiliated parties. According to

Plaintiffs, the test is used to determine whether prices are

influenced by a relationship between the parties, and therefore is

appropriate to use here. However, there is no authority supporting

the extension of the test to transactions between unaffiliated

companies. Moreover, it is logical that Commerce would apply a

different standard and procedure in evaluating transactions between

affiliates, which are less transparent and less amenable to

verification than transactions between unaffiliated entities.

16
Such pricing and sales arrangements [
]. See supra note 5; see also Verification Memo., Ex.
37 at 69.
Court No. 00-03-00136 Page 22

Plaintiffs have the burden of providing sufficient evidence

to justify exclusion of the sales as outside the ordinary course of

trade. In the absence of sufficient evidence to justify exclusion,

transactions are considered in the ordinary course of trade and are

included in the price comparison. Plaintiffs’ only evidence

supporting exclusion of the sales is the pricing treatment17 for

merchandise destined for Corporation B. See Pl.’s Mem. at 28-30.

Analyzing the facts gathered during its investigation, Commerce

drew reasonable inferences from those facts to conclude that the

sales were not outside the ordinary course of trade as there were

legitimate commercial reasons why such a pattern might exist.

Accordingly, Commerce’s decision to consider the sales in the

ordinary course of trade is supported by substantial evidence on

this record.

17
Namely, a [ ].
Court No. 00-03-00136 Page 23

Conclusion

For the reasons discussed in this opinion, Commerce’s Final

Results are sustained and Plaintiffs’ motion for judgment upon

the agency record is denied.

__________________________
Donald C. Pogue
Judge

Dated: November 30, 2001
New York, New York